Retention and attrition: getting it right ... finally! retention is better among customers who use online banking and a debit card.

• Author: Clapp, Bruce
• Position: Customer Retention

In a study by Celent, U.S. banks lead the pack in attrition and report rates up to seven times higher than in the United Kingdom and Europe. So why the difference and how does this relate to your bank in the heartland of the United States?

The biggest obstacle may be the very tactics that you are using to grow your market share! Free checking, while a boon for many banks in terms of growing the number of new accounts, has also accounted for an explosion in attrition. Why? This is a new breed of customer that we have "taught" to have diminished value n the core checking account and that a "free" account is available around every corner. Much to our dismay, they have actually exercised that right and transferred their checking account nearly as much as their credit cards! However, the realization is that people typically do not move their "main" checking account ... they move a transactional "household" account much more frequently. So the key is the have the "main" checking and not just "a checking" from your customers, The difference? We believe it lies within the debit card and online banking/ bill pay! Let's explore:

Customer A: They have a checking account with you. Average balance $1,050. No debit card, no online banking and have an average of 25 transactions a month on the account.

Customer B: They also have a checking account with you. Average balance $2,350. They have a debit card with nine average transactions, use online banking and just signed up for bill pay. They average 39 transactions a month.

So, which customer is better? And by better, we mean has a higher anticipated retention rate! It is, undeniably, Customer B! The key accounts are debit card and online banking. They are key indicators of "primary" checking usage. What is the typical piggyback process when you have the debit card...